United States: Massachusetts Extends Critical Compliance Deadlines Under The Paid Family Medical Leave Law

On May 1, 2019, the Massachusetts Department of Family and Medical Leave (Department) offered Massachusetts businesses a temporary reprieve by extending two key deadlines critical to the implementation of the Massachusetts Paid Family Medical Leave law (PFML). First, employers will now have until June 30, 2019 to provide written notice to covered individuals of their rights and obligations under the PFML. Second, businesses will now have until September 20, 2019 to file an application for a private plan exemption.

Although this announcement is welcome news for employers, many businesses continue to wrestle with how best to comply with their obligations under the PFML. Below are frequently asked questions raised by employers about the private plan exemption application process and the employer notice obligations.

Employees cannot request leave under the PFML until 2021. Why should I worry about this now?

On October 31, 2019, employers must make contributions for the previous calendar quarter to the PFML trust fund through their MassTaxConnect account. As a result, as of July 1, employers must begin setting aside those contributions. For employers that choose to require their employees to contribute to the PFML trust fund, this means those employers must begin withholding contributions from employees' wages beginning on July 1.

What should employers consider doing right now?

First, employers can post the mandatory poster issued by the Department.1 The poster must be available in English and each language that is the primary language of five or more individuals in an employer's workforce. The Department has issued versions of the poster in 13 different languages.

Second, employers can determine whether they wish to file for an exemption to the PFML. Employers can satisfy their obligations under the PFML if they offer a private insurance plan that provides benefits greater than or equal to the benefits provided by the PFML. An exemption approved by the Department would eliminate the requirement to remit funds to the PFML trust fund. Business can file for an exemption as late as September 20, 2019 for the first quarter contribution.

Third, employers that are not requesting an exemption must determine whether they will require employees to contribute to the PFML trust fund through wage deduction.

Fourth, employers must distribute written notices no later than June 30, 2019, to employees and independent contractors (paid on IRS Form 1099 – MISC). The purpose of these notices is to inform covered individuals of their rights and obligations under the PFML.

Our company only has one employee in Massachusetts. Do we have to do anything?

Yes. PFML applies to all private employers in Massachusetts, even companies with just one employee in the state. However, employers with fewer than 25 covered individuals are not required to pay the employer share of contributions to the PFML trust fund. Such businesses still must collect the workers' share of contributions and satisfy the PFML's notice and posting requirements.

How do employers apply for an exemption?

Employers interested in applying for a private plan exemption should do so through the Department of Revenue's MassTaxConnect site: https://mtc.dor.state.ma.us/mtc/_/. The Department anticipates responding to applications within two days.

To qualify for an exemption, a private plan must provide benefits that meet or exceed the benefits available under the PFML. This means an employer's plan must meet all the minimum requirements of the law and must not cost employees any more than they would be required to contribute to the state plan under the PFML.

Can employers apply for an exemption from part of the law?

Employers with a private plan may apply to be exempted from the medical coverage, family leave coverage, or both.

Can employers seek an exemption only for some of its workers?

The Department has stated that it will not approve an exemption for a private plan that covers certain employees and not others. Instead, to receive an exemption, a private plan must apply to all covered individuals associated with a given tax identification number.

When should employers file for an exemption?

Employers have until September 20, 2019 to file for an exemption. The Department will continue to accept applications on a rolling basis after that date, but applications must be approved in the quarter prior to the quarter in which they go into effect. This effectively means that employers that fail to file for an exemption by the September 20 deadline will be liable for contributions to the PFML trust fund for the quarter beginning July 1.

What if the Department denies the application for an exemption?

Employers may request that the Department reconsider its decision. If the Department ultimately denies an exemption application, the employer will be responsible for remitting the full contribution amount from July 1, 2019 forward.

How long does an exemption last?

Approved applications will only be valid for one year, but may be renewed annually.

Do we have to use the Department's model notice form?

No. Employers are permitted to use their own notice in lieu of the template notice, provided it contains the following information for W2 workers:

  • an explanation of the availability of family and medical leave benefits;
  • the employee's contribution amount and obligations;
  • the employer's contribution amount and obligations;
  • the employer's name and mailing address;
  • the employer identification number assigned by the Department (FEIN);
  • instructions on how to file a claim for family and medical leave benefits;
  • the mailing address, email address, and telephone number of the Department; and
  • any other information deemed necessary by the Department.

The notice to 1099-MISC contractors must contain the following:

  • an explanation of the availability of family and medical leave benefits and the procedures for self-employed individuals to become covered individuals;
  • the self-employed individual's contribution amount and obligations if they were to become a covered individual;
  • the employer's contribution amount and obligations;
  • the employer's name, mailing address, and email address;
  • the employer's identification number assigned by the Department (FEIN);
  • instructions on how to file a claim for family and medical leave benefits;
  • the address and telephone number of the Department; and
  • any other information deemed necessary by the Department.

Because the statute says that these notices must contain "[a]ny other information deemed necessary by the Department," it is possible that the Department may impose additional notice requirements when it issues final regulations later this year.

What if employees don't want to contribute into the PFML trust fund?

The PFML permits employers to deduct a portion of the required contribution from each employee's wages, even if the employee does not want the deductions to take place. The PFML does not permit employees to "opt out" of the law. Employers with employees who are covered by a collective bargaining agreement with a union should consult with experienced labor relations counsel before unilaterally making deductions from an employee's pay.

What if employees leave the company or retire before January of 2021?

Eligibility for PFML benefits is based on a covered individual's total earnings from all employers in Massachusetts in a benefit year, not earnings received from a single employer. This means that an employee who leaves a company before January 2021 may be able to obtain PFML benefits immediately after starting employment with a new employer.

That said, the PFML does not contain a mechanism for employees to obtain a refund of their contributions to the PFML trust fund. Thus, it is possible that employees who retire prior to January of 2021 may end up not being able to take leave under the law.

Can employers change their contribution rate?

Some employers have decided not to make deductions from employees' compensation for the time being. If an employer later decides to exercise its option to make those deductions, it may issue a new notice form to employees informing them of this change. Any change must be prospective in nature.

When the employer begins withholding PFML contributions on July 1, 2019, is the 2019 PFML income limit calculated using year-to-date wages?

No. The 2019 PFML income limit is calculated on wages or payments made to covered individuals from July 1, 2019, through December 31, 2019.

What's next?

The Department is expected to issue final regulations by July 1, 2019. Once those regulations are issued, we will provide additional information about employers' obligations under the PFML. Employers should contact experienced employment counsel if they have questions about the requirements of the PFML.

Footnote

1 The poster and the model notice form referenced in this article are available on the Department's website: https://www.mass.gov/orgs/department-of-family-and-medical-leave.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Christopher B. Kaczmarek
Alice A. Kokodis
Shannon M. Berube
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